Rule 506(b), which is considered a “safe harbor”, is more accessible as investors must only represent being ‘accredited’ (based on wealth, income and financial sophistication criteria), but Rule 506(b) requires a pre-existing relationship between the IM and the investor and does not allow general solicitation or advertising. The perception of ‘general solicitation’ is broad: a LinkedIn post announcing a deal or mentioning the fund at a conference could be considered general solicitation if the fund is still fundraising. 

Rule 506(c) allows general solicitation but requires that IMs take “reasonable steps” to verify that investors are accredited investors, rather than relying on representations by investors. Historically, IMs have not relied on Rule 506(c) much as there lacked clarity on what these reasonable steps were, which created an administrative burden. Investors were also reluctant to share financial documents to substantiate their accredited status. However, in March 2025, the SEC clarified that IMs could rely on minimum investment amounts (USD 200,000 for individuals, USD 1,000,000 for entities) and investor self-certifications to meet the “reasonable steps” condition. IMs are now considering Rule 506(c) to broaden their offering within the US. 

If an IM relies on general solicitation or public advertising in the context of a 506(c) offering, these marketing activities may however be visible in the European Economic Area (EEA). If that is the case, local EEA regulators may view the efforts as targeting EEA investors, even if this is not the intention. If the general solicitation only refers to the IM, this wouldn’t be problematic, but if it refers to a specific fund, it may be considered pre-marketing or marketing of the fund in the EEA, which would in principle require to notify the relevant authorities. 

When possible, IMs traditionally aim to rely on reverse solicitation in Europe, as EEA marketing and reporting rules then won't apply. The concept of reverse solicitation in the EEA is more restrictive than in the US: a pre-existing relation between the IM and the EEA investors is not sufficient. The investor must initiate discussions relating to a specific fund without being approached by the IM. A publication made under Rule 506(c) referring to a fund and visible in the EEA may undermine the ability to rely on reverse solicitation. 

Thus, it is essential to consult EEA legal counsel to assess whether US-facing 506(c) campaigns could affect distribution models for EEA investors, as this area remains largely unaddressed.

Want to know more about this topic? Read more of our New York office Snippets or reach out to one of our colleagues mentioned below.

This snippet was written in collaboration with Samantha Lopes from Nixon Peabody LLP.